EXCLUSIVE UPDATE, Thursday, 4 PM: In the wake of 2oth Century Fox’s decision to scrap exhibitor clearance requests, most major studios are taking a business-as-usual stance as they continue to yield to one theater in certain competitive zones.
Disney distribution chief Dave Hollis told Deadline today, “As has always been the case, we make any and all decisions regarding clearances based on our best business judgment as to what we consider maximizes the picture.”
Added Sony’s distribution honcho Rory Bruer: “We will make decisions theater by theater, picture by picture and we aren’t looking to change that. It’s our intention to continue to distribute our pictures on what’s right for each film.”
Another studio insider summarized, “Clearances are good for business.”
Despite all the brouhaha that clearances have stirred up with the Justice Department as they investigate Cinemark, Regal and AMC, many studio distribution chiefs say most clearances are mutual; and that the ones we hear about in the press are the few that went sour.
“Most of the clearance fights are smaller chains duking it out among themselves; they’re not battling the big theater chains,” asserted one distribution suit.
Nonetheless, the majors are watching the outcome of Fox’s maneuvers with theater owners as they begin to book X-Men: Apocalypse.
“Fox is trying to be smart about something that is becoming an issue,” said an exhibition insider. “The Justice Department has been involved in these situations with allocated zones and quite frankly the majors have been making haphazard decisions on who they’re clearing. It’s made everyone vulnerable including the distributors.”
Clearances have also been the subject of a major lawsuit against the big chains by iPic. Using Regal as an example, they said the big exhibs threaten boycotts to certain movie studios and their films whenever they also give smaller chains the title to release in the same area. In fact, iPic praised Disney for not buckling under, but others have gone along – specifically in court, they said that Universal, and Sony “capitulated” to what they see as akin to bullying.
“Fox isn’t stupid for doing this (to protect themselves from litigation),” said one theater owner. “While their decision to reject clearances doesn’t reinvent the wheel, it just doesn’t mean that the rest of us are going to ignore our rights for clearance.”
Another theater owner agreed saying, “If the competition is playing the same movie across the street, it’s a theater owner’s prerogative to turn down the film if they want to.” That same source pointed to one of the classic clearance zones in the U.S.: the AMC Empire 25 and the Regal E-Walk, which are directly across from each other on 42nd Street, adjacent to Times Square.
AMC Theatres issued a statement: “Clearances have been a long-standing industry practice for decades. However, AMC is confident we will thrive and prosper whether clearances continue or not.”
Essentially clearances provide a greater playability of product in a specific neighborhood. Clearance defenders say it avoids business being cannibalized for a specific title, plus it permits older titles to hold longer. Given the litigious fight between iPic and Regal over their Houston locations, one studio played the same title at both locations. Essentially business was bigger at the Regal in that instance over iPic.
By no means is anyone expecting Fox’s clearance blockage to impact X-Men: Apocalypse’s box office results, but it does raise more questions. Do second-run houses now have the opportunity to play first-run films? Is an exhibitor allowed to play everything day-and-date? In time all these questions will be sorted out.
Exhibition vet and consultant Rick Roman describes a situation where a clearance-free market would spur theater owners to improve their facilities so as to compete better with one another: “Due to clearances, theatres that are old and run down have survived because they have exclusivity of films. Moviegoers will see a tentpole film just about anywhere but the other films suffer when the theatre is old and run down. Without clearances a new theatre could be built or the old and run down theatre would need to renovate.”
PREVIOUS, THURSDAY, 12:14 AM: While exhibition and distribution were rubbing their chins over Wednesday’s news that the Screening Room is headed to CinemaCon, 20th Century Fox announced in the Wall Street Journal that it’s no longer honoring clearance requests from theater owners.
Clearances are defined as those agreements between a theater chain and a distributor whereby said exhibitor obtains the exclusivity to show first-run movies at its hubs within a certain zone, and thus block any nearby competition from playing the same title simultaneously. The misconception with clearances is that they’re negotiation tactics completely relegated to big chains. However, it’s a two-way street: indie venues request clearances over the big guy all the time.
20th Century Fox says that effective with the May 27 release of X-Men: Apocalypse, it will not honor clearances. One reason, per a Fox distribution suit, is so that 20th Century Fox can stay out of any litigation. Prior to the WSJ story, an owner of a small midwest theater chain phoned Deadline today to tell us about Fox’s latest decision and it wasn’t alarming. Here’s why: Fox already has a history of being consistently fair and equitable, particularly in regards to distribution issues that affect both large and small exhibitors alike. Five years ago I wrote a story about Flagship Theatres’ legal woes with Cinemark’s Century Theaters, and a then-Fox executive specifically told me that they didn’t tolerate circuit dealing: “My company doesn’t make a policy of stiffing the little guy in favor of the big one. It’s in no one’s favor. Besides, the studio decides what is competitive and we’re constantly doing research to analyze the environment and what makes it competitive.”
In this day and age when a film like Disney’s Star Wars: The Force Awakens breaks a slew of records and becomes the highest grossing film of all time at the domestic B.O. with a total $933.9M, major studios can’t afford to acquaint themselves with theaters’ clearance requests since there’s no financial gain in it. When a studio needs a film to be everywhere, it’s everywhere. Also with the different types of movie theaters that exist today from PLFs to restaurant/multiplex combos, Fox believes the consumer should have the right to choose where they’ll see a movie. This puts some pressure on exhibition to provide a better experience than their competition down the street. Generally, in regards to clearances, it’s the smaller distributors who find themselves being strong-armed by big chain requests: They can’t afford to live without big exhibition, especially when they’re trying to cross a successful limited release over to a mainstream audience.
Smaller exhibitors contend that circuit dealing is alive and prevalent. IPic Theaters, a chain of high-end luxury venues-cum-restaurants, sued Regal and AMC Theatres in a Texas district court last fall claiming they were using their market muscle to squeeze out iPic’s Houston multiplex and another one being planned in the Dallas area. IPic says its Houston location was unable to book the first-runs of The Martian, The Revenant, Bridge Of Spies and Steve Jobs because Regal and AMC were bullying the studios.
Despite receiving an appeal in the fall of 2011, Flagship’s case against Cinemark is still ongoing. Since 2002, when Century acquired the River Multiplex in Rancho Mirage, CA, it allegedly cannibalized first-run titles available to Flagship’s 10-screen cinema, The Palme D’Or — owned by Oscar nominee Bryan Cranston; ESPN radio host Steve Mason; Brian Tabor; producer Alise Benjamin-Mauritzson (Ray); and her husband, Andreas Mauritzson — a Palm Desert, CA theater that’s two miles down the road on Highway 111. At the start of their trial, The Palme was shut out from playing Sony’s The Da Vinci Code in 2006, despite offering better terms to the studio than the River. Flagship Palm Desert regularly offered to open films on three screens and guaranteed three months on screen (which The River couldn’t offer) and Sony still accepted lesser offers from Cinemark.
In 2014, 20-theater chain Cobb Theatres went after AMC in a U.S. District Court in Georgia. Cobb said that AMC used its monopoly muscle to block some first-run movies from being screened at an upscale venue in Atlanta suburb, Brookhaven. Though AMC moved to dismiss the case, a federal judge allowed it to proceed. Since the middle of last year, the Department of Justice has been investigating Regal Entertainment Group, AMC Entertainment Holdings Inc. and Cinemark Holdings Inc. in regards to any federal antitrust laws violations. However, per the WSJ, no formal investigation is under way.